The United States Department of Justice plans to sell $56 Million worth of cryptocurrency it seized in connection to its case against BitConnect, a Ponzi scheme.
The Justice Department announced Tuesday that it will sell the seized cryptocurrency and keep the proceeds in U.S. Dollars until BitConnect victims are compensated. The $56 million worth of crypto is currently held by the U.S. government in cryptocurrency wallets. It stated that the amount of compensation for BitConnect victims would depend on the court’s “future order to restitution” at sentencing.
The Justice Department stated that BitConnect was the biggest cryptocurrency fraud scheme in America for which criminal charges were filed.
It is unclear how the U.S. government will handle the sale of cryptocurrency worth millions of dollars, and what impact it might have on major assets such as Bitcoin (BTC), Ether (ETH). Cointelegraph Markets Pro data shows that the BTC price hovers around $60,000, having dropped roughly 7% Tuesday. The price of ETH, however, is $4,254 at publication time, following a similar drop.
BitConnect’s actors were responsible for a fraudulent, unregistered securities offer that netted them $2Billion. Glenn Arcaro, the project’s former director and promoter, pleaded guilty to fraud charges and BitConnect was ordered to pay $24 millions to its victims.
Both Satish Kumbhani (BitConnect founder) and Arcaro were also charged by the Securities and Exchange Commission (or SEC). Their whereabouts are not known at time of publication. While settlements are being made with the SEC regarding other Ponzi scheme participants are still pending, many individuals are facing severe financial penalties or prison time for their role in allegedly defrauding investors.
Related: 5 SEC officials are charged with illegally promoting the $2 billion Bitconnect Ponzi Scheme
BitConnect was founded in 2017 by promoters who promised large returns and enticed investors to use Bitcoin as collateral. This allowed them to borrow or trade BitConnect’s native token. Many investors were unable to redeem their crypto holdings after the platform was shut down by state regulators in 2018.